It takes two to tango (Final Episode)

I could use this last episode for making some comments about the benefits companies could potentially obtain from producing and selling eco-friendly products. I’ve mentioned one in the Starbucks case: raising the bar for competitors (or creating barriers… po-tay-to, po-tah-toe). Another one is getting into markets that are niches today, but are expected to grow strongly in the upcoming years... I’m not only talking about sales here, but also about shaping a new market so that the rules set by the first players are the ones the companies that enter later have to play by.

I could also speak about how eventually all of us will have to consume products that are not harmful for the planet because, breaking news, the Earth happens to be finite.

But instead, I came up with a list of What-To’s and How-To’s that companies could implement (or have already) in order to stimulate the consumption of eco-friendly products, and that are the product of all the reading and thinking and writing of these posts.

Knowledge is power There’s a curious thing about the awareness stage for green products: companies can educate consumers while getting into their minds as a possible choice. Sometimes the limits between awareness and interest are a little blurry, and a company will be saying “Hi, I have a product that could be suitable for you” and “My product has these benefits to offer” at the same time. So let’s say one of the benefits is that you can save energy by using the product, why is that relevant? Because you’ll save in your electricity bill, ok, but also because we all have to try to save energy and be more conscious about the usage of natural resources.

By now you should know I love to give examples: Wal-Mart and GE partnered for promoting the use of efficient light bulbs. Wal-Mart put the bulbs in the most desirable position in retailing -the shelves at eye level-, adding an educational display from GE so that the consumers could learn more about the product and about energy saving. What we have here is the best kind of availability you can get at a supermarket store, making the bulbs appear as an attractive option and informing the consumers about an important issue. Remember when in Association of ideas I spoke about the new role that companies have in societies? Educating consumers is part of it.

Engage, entertain, give a role to people This is a little Marketing 101, but it’s always more effective to send a message when you say things that are relevant and understandable for your target market. Maybe it was not so difficult for Timberland, but what if you need to address a customer that can’t easily see the link between your product and the impacts it causes in the environment? Well, there’s a number of things a company can do.

You can shape the message so that it’s entertaining. I have two videos that are excellent examples of this: one is from Epuron, a German company that supports large-scale renewable energy projects. Check it out here, I think it’s really sweet: http://www.youtube.com/watch?v=cQbl1c63Ofo. The other one is for inviting people to walk instead of riding a car, an initiative proposed by Do the Green Thing: http://www.dothegreenthing.com/actions/walk_the_walk.

You can also pick a messenger that is attractive to your audience; in the case of the Surf Excel add, the people from Unilever chose a famous Indian actress. Or you can show people how to be part of a change towards green, like Ariel’s Turn to 30 campaign.

The more, the merrier Even if a company decides to operate in a sustainable way and actually does, polls show that consumers trust more in nonprofits and environmental groups. It’s a respectable perspective, since reading “We’re sustainable” in a company’s website guarantees nothing. So why not inviting a competent third party? They add credibility to the company’s operations; plus, they have been in the “green business” for a while, so companies can learn from their expertise… Starbucks had a successful experience partnering with Conservation International. I know that it is not related to the environment, but Unicef joint efforts with a lot of companies, P&G and Unilever are two that I mentioned in this series.

Timberland did not partner with a nonprofit -at least that I know of-, but created a group called Earthkeepers, just like their eco-friendly line of shoes. This invites people to be part of their actions and gives a role to consumers, like I said in the previous bullet.

It’s not rocket science! It is absolutely true that consumers are more informed that they used to be, and that gives them the possibility of making wiser choices when they have to buy something. But this doesn’t mean that people should read an encyclopedia before buying every item on their grocery list! There are some products that have a clear sign on their packaging showing they are less harmful for the environment. A common example in the US is the Energy Star sticker that efficient appliances have, showing that the Environmental Protection Agency certifies they are true energy savers. I think this is great, because consumers shouldn’t need to solve differential equations to tell whether or not a light bulb or a heater will make them save electricity.

On the other hand, while writing these posts I checked the websites of some products we use every day I found a lot of environmental and social programs the companies that produce them have. Unilever is changing the fridges where their ice creams are displayed in Europe in order to cut climate change, reducing the use of energy and the waste of water in one of its frozen food plants in Italy, and implementing several packaging recycling programs in Brazil, among other examples. I thought it is too bad you don’t get to know these things until you visit their sites… Of course over claiming how fantastic your company is is not exactly a good idea, but a little information doesn’t hurt!

The good news for all of us, the younger generation: we have a lot of work ahead of us! :)

It takes two to tango (Episode Six)

Let’s say that a certain eco-friendly product went through all the first stages: it made it to the possible-alternatives list in the consumers’ minds, its features were relevant and interesting enough to generate desire. A number of people are willing to buy it (yay!)… what happens next? Well, there’s a huge chance it will be more expensive than the traditional version, and price does matter when we make a purchase decision.

There are two main reasons for the higher prices to happen. The first one is related to how young green products are if we compare them to their old equivalents: whenever a new service/product/knowledge/technology sees the light, it will be more expensive than the existent options. Maybe it’s because of lack of scale, maybe it’s because it’s exclusive and niche-oriented, but the point is that it takes a while for its price to lower and to make the good comparable to other possible choices.

The second reason could be simply stated as “It’s expensive to be sustainable”. Companies that are really committed to living up to sustainability standards have to invest a lot of money and time supervising their own operations, their suppliers’ and their commercial channels’. This might involve:

• Making sure their suppliers and distributors don’t have underage employees.
• Buying raw materials that are certified by competent authorities that ensure there’s not overuse of a certain resource.
• Modifying their production processes in order to reduce the amount of energy used, reduce their emissions, and treat effluents before discharging them.
• Redesigning distribution routes in order to reduce carbon emissions from the trucks.

... and so on and so forth. So it’s not that crazy that part of that cost is eventually transferred to the final price. There are people willing to pay a premium for this, but let’s face it, not all of us would. However, price is sometimes tricky and can include a benefit that can't be seen at first sight. Energy efficient lamps last way longer than the traditional ones, and help cutting electricity bill amounts down. This last feature is also valid for other appliances, such as efficient washers and TVs.

There is one more potential barrier: what if you go to the store looking for a particular item and you don’t find it? Chances are you’ll feel disappointed and buy a substitute, and perhaps won’t try to find the green option in the future. That turns you into a huge lost for the company, because you went through the whole purchasing process, and the lack of availability ruins it at the very end of it. It could get worse if you decide to tell other people what happened to you and they also feel disinclined to give green a chance. Bottom line: availability is just as important for eco-friendly options as for any other kind of product.

With this sixth episode we’ve gone through the whole purchasing or selling process, depending on where you decide to stand. I hope you enjoyed the ride so far, and that you come back for some final comments!

It takes two to tango (Episode Five)

In the last post I told you that making green products attractive is particularly difficult because people don’t think their quality and durability reach the “good enough” standards, and because they don’t always believe products are green at all. We have an explosive combo for this barrier: bad perceptions and lack of trust.

Apparently, consumers are more likely to trust environmental groups and scientists than the government, the media or the companies when it comes to these issues. Sadly, they are not so wrong because some companies haven’t been completely honest claiming their products were eco-friendly. Some “don’t do it at home” examples:

• Labeling a product as eco-friendly because it doesn’t contain a substance that is forbidden. The classic example is the one about the CFCs in aerosol cans that damaged the ozone layer… when CFCs are not used for this purpose since 1996!
• Making fallacious comparisons like stating that a certain SUV is greener than its competition because it makes more distance with the same amount of gas when, hello, SUVs are not exactly what we could call fuel efficient.
• Using complicated, pseudo-scientific terms that regular consumers cannot understand, and lead them to the conclusion that purchasing the product is not harmful for the environment.
• Giving figures that seem to be good for, let’s say, emission levels, but mean nothing at all if you don’t provide the legal standards as well. There’s this motto engineers use all the time, “You can’t improve what you can’t measure”… well, neither you can tell whether something is wrong or right if you don’t know how it should be in the first place.

Don’t panic, I have good examples too! You probably know Timberland, a brand that sells shoes for outdoor activities. A couple of years ago they started sticking a label on the boxes explaining the impact each pair produced, dividing it into three categories(*):

• Manufacturing, detailing where the pair was produced (factory and country).
• Environmental impact, explaining the amount of energy that was used for the production of the shoes, and what percentage of that energy was renewable.
• Community impact, showing the percentage of factories evaluated by Timberland against its Code of Conduct, and the number of hours employees volunteered in the previous year.

Remember this post and the previous one were about emphasizing products features for raising interest and creating desire? Well, Timberland kind of had an advantage because its target market is mainly composed by people who love to be out and enjoy nature, and therefore reducing environmental damage is relevant to them. They saw they could take advantage of that and went for it, so claps to them! And by the way, guess the word they actually used instead of impact: footprint. Accurate, yet a bit obvious…

(*) You can learn more about this by going to their site (http://www.timberland.com/earthkeepers/index.jsp)

It takes two to tango (Episode Four)

While I was writing these posts I started to pay attention to what points companies focus on here in Argentina when trying to raise interest in their products. Of course it depends on what is being sold, but some general concepts I thought of are:

For hygiene products -both personal and for the house-, performance. Dishwashing liquid will eliminate grease and perhaps take care of your hands. Shampoo will leave your hair clean and make it grow stronger, shine more, look frizz-free, or any other possible hair issue you want to solve. Cleaners for the home will remove all sorts of stains and sometimes kill bacteria. Detergent for washing clothes will leave them clean without ruining the colors.

For cars, performance, lifestyle and status(*). The general idea is to show how the vehicle’s features will make it fit into your familiar/adventurous/spontaneous/fast-lane/(fill-in-the-blanks) way of living.

For food and beverages… well, it depends. I’d say it’s mostly about showing that consuming the product is equivalent to adopting a way of living, whether it is you choose to be healthy or happy and positive or super cool or very exclusive and with a busy social life. Occasionally the product has an additional benefit -besides satisfying the specific need-, like helping you save money, or making your life easier because you don’t need to put too much effort into, let’s say, cooking.

For technology gadgets… it depends again. Some focus on the real-life feeling they provide, like flat screens. Some of the benefits are all about lifestyle, about belonging to an exclusive group... yes, I’m thinking about a certain brand that has become very popular because of its mp3 players and laptops and cell phones. Speaking of which, cell phones have the obvious benefit of making people reachable virtually 24-7; and then all sorts of additional features like cameras and music players and games. One more, digital cameras: what matters is the quality of the image and the versatility of modes (for different lighting conditions, for capturing motion)… a “more emotional” benefit could be the possibility of having captions of situations your life.

In the first of these posts I said consumers show concern about the impact the products they purchase have on the environment… then why haven’t I mentioned companies that emphasize eco-friendly features in their products? (I’m aware there are some, but I’m speaking in general terms). Because what people put first are performance, reliability and durability… I would add price because I live in a country where it happens to be a major purchase driver.

Let’s go a bit further… why is this the set of drivers? I would say mainly because old habits die hard: these are the things that have been important to people for decades, and purchase behaviors take a (long?) while to change. According to some articles I read, there’s another reason: the first green products that ever existed were not as good as the traditional ones. The first energy saving lamps didn’t fit properly into most normal appliances, took a while to turn on and did not provide enough light. The first cars that didn’t use gas had less power than the traditional ones.

We’re dealing with a very delicate issue here, consumer perception, which is extremely hard to change. And it gets even worse: people don’t only doubt the quality of green products, but how eco-friendly they actually are. How is it possible to make the products attractive and to create desire, then? Find out in the upcoming posts!

(*) Thanks for the expert insight, A :)

It takes two to tango (Episode Three)

Let’s go to the first barrier to be tackled, lack of awareness. Most of us don’t know about the eco-friendly options in products we use or consume every day. Of course I could go straight to how all of us should switch to more efficient vehicles -which is indeed important, because these emissions are the main cause for global warming-. But since changing a car is a pretty important decision and efficient technologies are still being developed, quite expensive and not even available in all countries, I prefer to focus on other products we all buy: consumer goods. I chose cases related to Unilever and Procter & Gamble because they are the two main players in the consumer goods market, and have been making efforts for a while to educate their customers on how they can make an impact by consuming their brands.

P&G’s Ariel is a brand of products for washing clothes, and a couple of years ago launched a campaign in the UK, for which the slogan was Turn to 30. The idea was to show people that they could wash their clothes at 30°C and still get great results by using Ariel Excel Gel. The numbers behind: 40% or more of the energy used in each load can be saved by washing at 30 degrees and that implies a double benefit, because consumers save on their energy bills and reduce their carbon footprint at the same time. I think this particular campaign should get bonus points for showing people how to get involved! You can check out the TV ad by going to http://www.tellyads.com/show_movie.php?filename=TA3446

In this same product category we have Unilever’s Surf Excel, which is sold in India. The brand changed their formulation and launched a campaign that aimed at tearing down the myth that more soap lather means cleaner clothes. More lather means more rinsing, and therefore unnecessary water wastes, which is particularly critical in dry states where the money people spent on the water was more than the money spent on the detergent. Although I can’t understand the words on the TV ad (http://www.youtube.com/watch?v=GL62PHbKK4g), the promise the brand made was that consumers would save two buckets of water a day without compromising stain removal. We have a win-win situation again: consumers save money, and less water is wasted.

I think these examples are very accurate for the awareness stage that I told you about: both brands got into the consumer minds as possible options for washing clothes. Their offers of saving money -whether on energy or water- are actually related to interest stage of the process, but sometimes it’s difficult to separate the steps from one another. Anyway, I found the results of the Surf Excel’s campaign: sales increased by over 50% in Tamil Nadu and Andhra Pradesh, two dry Southern Indian states. Not bad, uh?

It takes two to tango (Episode Two)

Are you familiar with the process companies have to go through when selling products? Last time I heard about it was in my Marketing class (yes, I do realize I keep posting stuff that I studied in that particular class!). Anyway, the act of selling can be divided into four stages. In the first one, awareness, consumers are aware of the existence of a product. Then there’s interest: companies raise customer interest by emphasizing product’s benefits. In the third stage, desire, customers must be convinced that they want the product because it will meet their needs. Finally there’s action, and customers are stimulated to purchase. Some people think there should be one more stage, satisfaction, in which the customer is satisfied and therefore becomes loyal to the product or brand and recommends it to other people.

That is the companies’ perspective… but what about the purchase process we follow as customers? This time we can mention five steps. First we identify the problem, the need that we want to satisfy. Then we find information about possible products that could be suitable, and evaluate the different alternatives. The fourth step corresponds to the decision of purchasing, and the final one to our behavior once we acquired the product.

As you can see, there is a certain correspondence between these two processes. If a customer is evaluating different products, it’s because he or she knew they existed in the first place. The decision of purchasing is obviously linked to the idea that the product will get the job done. And of course, if the product was indeed what the customer expected -or more-, he or she might tell others about that positive experience. All these concepts can be applied to any product or service, no matter what benefits it provides or how expensive it is… of course, depending on the type of product, consumers will give more or less thought to each stage of the purchasing process, and companies will spend more or less resources on the different steps of the selling process.

These posts are devoted to green products, and as I told you in the first episode there’s not enough information about them… and information happens to be a cornerstone here! Think about it: no information in the first stages means people don’t know that the product is being sold. Supposing customers are aware that the product exists, no information about its features and advantages means customers cannot tell whether it is suitable for solving their problem or not, and therefore if they want to buy it or not. Bottom line: companies develop and produce green goods, but “knowledge barriers” prevent them from being sold.

I invite you to read the upcoming posts and find out more about lack of information in every stage, and what companies are doing in order to remove these barriers… as always, I’m willing to listen to your comments!

It takes two to tango (Episode One)

Last year I was with a couple of friends when we came across a photography exposition by Yann Arthus-Bertrand. It was a series of pictures taken from the air, showing landscapes from all five continents… perhaps you found it in your city too, it’s been all around the world. This photographer is part of a foundation called GoodPlanet, that seeks to rise public awareness of social and environmental issues to which we are all exposed. Some of the pictures had comments related to sustainable development, and one of them caught my attention: it said that if everyone on Earth had the same lifestyle as people in the Western World, we would need at least two extra planets to sustain ourselves.

So-called green-issues and climate change have been hot topics for a while… NGOs were the firsts rising their voice, then Governments and companies started to show their concern. If you are not part of a nonprofit, a government officer or an executive there’s one role you cannot escape from: you are a consumer. Regular people are becoming more and more aware of these kind of issues, and the way their consumption habits affect the environment and the use of resources. In fact, according to a 2007 McKinsey survey of near 8.000 people in eight countries (*), 87% of consumers worry about the environmental and social impact of the products they buy. Yet, no more than 33% of those same consumers said they were ready to buy green products or had already done so. Indeed, if you look at the supply side of the equation, most of the green goods on the market have very thin shares.

We have people that at least show concern for the environment on the one side, and companies producing green goods on the other side… that should be enough for the most basic model of economy, right? What is lacking, then? Apparently, information -the third essential element for the perfect market model-: a 2007 Climate Group study discovered that two-thirds of US and British consumers cannot name a single green brand. This implies that companies don't do enough by producing environmental friendly goods or reducing the carbon footprint in their operations.

I kind of like the writing-in-episodes way of posting, so I’ll try to analyze this phenomenon in a couple of entries. And by the way, since one of the main inspirations for these posts was that comment on the photo exposition, I’ll use the pictures that I liked the most as illustrations :)

(*) Brazil, Canada, China, France, Germany, India, the United Kingdom, and the United States.

Wake up and smell the coffee (Final Episode)

As you might remember, the idea of telling you about the Starbucks case was born while I was studying for my Marketing Final. The way this company heard what their customers had to say first when they were worried about the lack of green growing practices, and then about how significative the results from the Chiapas Project were, seemed to me one of the clearest examples of the two-way communication between companies and society that is becoming more and more frequent.

Through the four episodes you saw that the process of getting involved, although rewarding, was long, complex and quite expensive. Now, did Starbucks do it only out of good will? Of course not! Ok, they were commited to sustainability and made it very clear in the principles for their mission statement… but there’s more to it. And I have two quotations to prove it:

“If only one company in the industry is doing the right thing, it’s not going to solve the problem, so for the good of the industry and the good of the world you need to have the whole industry doing it.” Glenn Prickett, Vice president of CI

“75% to 80% of customers reward corporations that are perceived to be good corporate citizens; 20% punish those that are not.” Senior vice president of CSR at Starbucks (I don’t have their name, sorry!)

Maybe I haven’t recovered from the Finals but to me this sounds a lot like Marketing 101: anyone else perceives positioning strategies over here? It’s not cold hearted at all, though, we have a perfect win-win situation: CI found a wonderful partner for their program to work, farmers improved their way of living by at the same time conserving the environment, and Starbucks created yet another differentiation driver in the specialty market industry, rising the bar for its competitors.

The whole point of this last post was to show that any form of corporate responsibility is not equivalent to charity at all. Companies don’t spend money by enhancing the way they operate, they invest it… and if they work hard enough and make CSR part of their core business, repayment eventually happens.

Wake up and smell the coffee (Episode Four)

Are you wondering what happened once the Chiapas project was implemented? In the first year of the collaboration Starbucks bought two containers -a little less than 35.000 kilogrames- of shade-grown coffee from the cooperatives, at prices significantly higher than the prevailing market price in the area. The company announced the introduction of this new variety in a small news conference, and the executives were surprised when they found out that the press was very interested in their actions.

Last year I attended a talk where the speaker said “If your company is going green, expect cynisism”. Well, this happened when Starbucks made their announcements: people thought that two containers were nothing compared to the thousands of tons the company purchased every year. They kind of had a point… still, it was just the first outcome of the project! However, Starbucks executives heard what their customers thought and decided that in order to show their commitment was significative, the production bought from Chiapas’ farmers had to be way higher.

By 2002, purchases of shade-grown coffee increased to nearly 700.000 kilogrames; the coffee was offered in bags in US stores, and by the end of that same year it would be sold in the stores to be opened in Mexico City. The project in Chiapas resulted in a 40% average increase in farmers’ earnings, and a 100% growth in the cooperatives’ international coffee sales.

Starbucks went one step further after the success with the Chiapas project: based on the expertise they had gained through the process, they developed a set of purchaising guidelines to extend the scope of their actions towards conservation and fair livelihoods for farmers. The concept was to create positive changes within the global coffee community, not by replacing existing supplier realtionships, but by developing sustainable practices throughout the value chain. The principles were designed along with CI, and reviewed by a wide range of nonprofit groups and coffee-system stakeholders.

Under Starbucks’ new system, suppliers of any size or location could earn up to 100 points for performance in three sustainability categories: environmental imacts, social conditions and economic issues. If a supplier met all the criteria, it would become a prefferred supplier and its coffee would have priority in Starbucks’ purchaising queue. A producer’s performance had to be verified by a competent third party.

That’s all the info I wanted you to have… maybe now you can see why I divived it into several episodes! Next will be the last one, and I’ll give a personal point of view on why Starbucks got involved in the Chiapas project. Stay tuned!

Wake up and smell the coffee (Episode Three)

So far I’ve told you about Starbucks’ motivations for changing its purchaising policies and how they partnered with CI... this episode will be about how the project actually worked.

Back in the beginning, the Chiapas project offered technical assistance for improving growing techniques and coffee quality. CI also provided organizational assistance to the farmer cooperatives so that they would be able to market their coffee more effectively and efficiently. In order to be part of the program, farmers and cooperatives had to sign an agreement with CI. According to the degree of achievement of targeted farm improvements agreed upon between CI and each farmer, and upon meeting Starbucks quality standards, producers would gain the right to sell an increasing percentage of their crop to Starbucks for its premium prices.

There were two main practices that had to be implemented so as to remain in the program: no trees could be cut down on the farms or the Reserve, and no coffee pulp could be thrown into the rivers. Other criteria included the planting of shade trees, the conversion of coffee pulp and other organic matter into compost for fertilizing coffee plants, the payment of fair wages and the sheltering of hired farm laborers. The precise standards were tailored to each farm’s context and translated into a work plan agreed to by the farmer and against which performance was evaluated.

Additionally, CI provided training courses in the villages to the farmers, cooperative managers and technicians on organic farming methods, tree planting and pulping methods, and quality control. Business planning and management courses were given for the cooperative leaders. Further more, CI tried to select one model farm in each community as a demonstration site for best practices.

On the Starbucks side quality was a major issue, therefore they had to be very clear on the standards to be achieved. They informed them to CI, who sampled and graded every lot delivered by a farmer up to the point where every single bag could be traced. Farmers received feeback on any corrective actions that would improve quality.

In August 2000 the partnership was extended for an additional three-year period, with Starbucks contributing US$600.000 and four key elements to focus on:

• Extending CI’s and Starbucks’ work with farmers to promote conservation in a wider range of global biodiversity hot spots.
• Supporting the introduction of a year-round product line that reflected Starbucks’ commitment to alternative environmental agriculture and socioeconomic improvements in certain coffee-growing regions.
• Developing coffee-sourcing guidelines that incorporated sound environmental management practices and provided fair conditions to farmers.
• Seeking to engage other leaders in the coffee business in a collaborative effort to articulate industry-wide guidelines for environmental and social quality.

We're getting really close to the ending of this case; soon I'll tell you more about the outcome of the project... in the meantime, I'm really looking forward to hearing your impressions!

Wake up and smell the coffee (Episode Two)

In their effort to promote sustainable coffe plantations and fair payment to farmers, Starbucks formed an alliance with a nonprofit organization called Conservation International (which you will find sometimes mentioned as CI). Since this collaboration agreement was decisive for the project Starbucks was part of, I decided to change my plans a bit and to use this second episode to tell you how the company historically had a responsible way of thinking their business, and how this alliance was born.

In 1990, Starbucks created its mission statement, expressed as “to establish as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow”. This statement relied on six guiding principles, including “to apply the highest standards of excellence to the purchaising, roasting, and fresh delivery of our coffee” and “to contribute positively to the communities and the environment [that the company was part of]”. Alligned with these principles, Starbucks paid 2,5 times the price the US market paid for green coffee by 2001; and in 2002 increased its direct purchases from small to midsize farms and co-ops from 9% to 59% of its cofee supply.

The mayor shift the company made in its purchases policies was, however, the introduction of environmental preservation efforts focused on shade-grown coffee through an alliance with Conservation International. This organization had the mission of conserving the Earth’s living natural heritage and its global biodiversity. Back in the mid 1990s CI had identified coffee as an important commodity affecting biodiversity and conservation, since coffee plantations had been taking over areas otherwise covered by rain forest. Traditionally, coffee had been grown under shaded conditions, but in the 1980s new higher-yielding varieties were introduced that were grown in full sunlight and generally in conjunction with intensive agrochemical usage.

In 1996, CI launched a pilot Conservation Coffee Program with three coffee cooperatives located in the El Triunfo Biosphere Reserve in Chiapas, Mexico. The region had been declared protected area by the government in 1972 because of its important biodiversity, and there were around 14.000 farmers operating in the area (with coffee being the main crop). CI’s program aimed at preserving and promoting shade-grown coffee; the task of getting small farmers to change their regular practices for conservation methods was not easy, though. In the words of the head of the CI’s Coffee Initiative “Farmers are great economists: ‘A day doing what I know, I feed my family. A day trying a new way, I might not'. So we knew from day one that we had to offer clear benefits to accelerate adoption of conservation practices”.

It was clear for CI that linking with a mayor coffee buyer was key for the program to work out. They approached Starbucks in 1997, but the company was reluctant at first: even if making a positive impact was one of their guiding principles, they were not willing to buy coffee from just anybody because sacrificing quality was not an option. On the other hand, they were experts in selling coffee, and CI was an expert in conservation: a fruitful partnership would leverage both parts’ expertise.

By the beginning of 1998 both companies signed a memorandum of understanding for a pilot sourcing program. Starbucks agreed to go out to Chiapas and communicate to farmers what they had to do to bring their coffee up to its quality standards, although there was no commitment to buy. The company did commit to contribute US$ 150.000 over three years. Meanwhile, CI’s role was to work directly with the farmers, as it had been doing since the pilot program was launched in 1996.

This was just the start for the collaboration agreement. Since this first step turned out to be successful, both organizations extended the reach and the duration of the project… but I’ll tell you more about that in the upcoming episode!

Wake up and smell the coffee (Episode One)

As I promessed in my previous post, I’m starting my “What some companies did in real life when facing customer demands” series with a case that involves Starbucks. When I started writing down all the relevant information I realised that the case is quite long, and since I want to go over a couple of points I decided to divide it into several episodes so that you don’t get lost. This first part is kind of a background… so let’s get started.

Maybe you’re familiar with the Starbucks brand, maybe not. The company, devoted to the specialty coffee segment, started in the early 1970s in the city of Seattle, and in 1982 Howard Schultz -current CEO- joined as head of marketing and overseer of the retail business. After two years he had problems when the owners didn’t accept his ideas for extending Starbucks’ reach, and eventually left. In 1987, the owners were looking to sell the company and Schultz acquired the entire operation, merging it with a line of espresso bars he had founded after leaving.

In 1992 Starbucks went public; simultaneously the company started its international expansion, and established strategic partnerships with PepsiCo for the production of bottled Frappucino and Dreyer’s for a line of ice creams. By the last quarter of 2002, Starbucks had 4.000 stores in the United States and 1.500 in 22 other countries, with plans to expand to 10.000 stores in 60 countries by 2005, and 15.000 by 2007.

In 2001 the coffee industry was going through hectic times. Increased production at a worldwide level had made the market prices fall to their lowest in 30 years: out of the seven million tons produced, less than six million were actually sold. Two main concerns arose then: on the one side, Fair Trade movements started to pressure large coffee buyers to pay higher prices to small growers; and on the other side, environmental groups claimed that growing practices were leading to habitat destruction.

By 2001, the North American coffee market purchased 17% of the coffee beans produced worldwide, and around 16% of the beans consumed in the US corresponded to the specialty market. Still, less than 1% of the coffee sold in the United States as a whole was grown in sustainable conditions. By that time, Starbucks was already getting letters from its customers asking why weren’t they buying shade-grown coffee and contributing to the protection of the rain forest where coffee crops were generally grown.

This is the scenario for the case… My next post will revolve around how Starbucks dealt with the environmental part of the equation, and in the following one I’ll tell you more about the social aspects of the project the company was part of.

Association of ideas

Since the Finals Season began for me this past week, I had my (hopefully) last Marketing exam on Thursday. As I was reading the documents related to Promotion, I came across a timeline that describes how marketing communication evolved through the twentieth century. Here’s a summary:

In the 1920s the focus was on maximum production, and the concept of customer-oriented research for designing products did not exist at all.
During the 1950s, customers were thought of as a huge bunch of people with no difference between them. Along with the rise of the media came the massive communication, with advertisements centered exclusively on the product.
The birth and development of Information Technologies in the 1970s made possible for the retailers to get to know their costumers: what they preferred; where, when and how often they consumed. The concept of brand loyalty began around those years.
By the beginning of this century there was an important shift in marketing communication: it started flowing both ways, going from a monologue where companies advertised and customers did nothing but listen, to a dialogue in which societies have started to rise their voices so that corporations can hear them.

So I thought of something that I started to hear a couple of years ago and keep listening over and over: companies are now seen as social actors, and in such role they are not only responsible for giving jobs, but also for taking care of the people that work for them and the communities they are part of (both socially and environmentally)… in a number of cases they are even asked to perform activities that actually correspond to the State. Moreover, in some countries people not only question companies’ operations, but their suppliers’ and distributors’ as well.

And then I remembered about something Philip Kotler said at a talk I had the chance to attend last year: if your company went under, who would notice? Who would care? Satisfaction is no longer measured only by how well a product adjusts to customer’s needs, but also by the impact it has on society in all sorts of ways.

So I thought of a couple of cases that I know of and that I’d love to share with you, in which companies faced challenges imposed by the demands of customers that expected them to play a positive role in society. I will tell you about these cases in my next posts, so I hope you enjoy them and let me know what you think!